(Note: the umlaut was missing in the Westlaw caption.) The parties make and sell intermediate bulk
containers (IBCs), which are used to store and move goods. They have an outer cage and an inner
bottle. The outer cage attaches to a
pallet and can be metal, wood, or plastic, while the cube-like plastic bottle
will hold between 170 and 330 gallons.
The pallet and cage help the bottle keep its form and protect it from
impacts or contact with other containers.

Schütz is the leading seller of IBCs in the US. Its new IBCs have metal cages and bottles
made of high density polyethylene (“HDPE”) designed to fit in them. Schütz also sells used IBCs that it has
either washed or rebottled (both pretty much what they sound like: Schütz
either cleans or also provides replacement bottles). Schütz marks both the outer cages and the
inner bottles with its name.

Defendants Mauser and NCG are affiliates. They compete with Schütz; Mauser makes new
IBCs with bottles designed to fit Mauser cages.
Unlike the Schütz bottle, which is basically flat on all four sides, the
Mauser bottle has indentations on its side walls to line up with the bars on
the Mauser cage. NCG reconditions IBCs,
which includes washing and rebottling.
The key issue here is “cross-bottling,” which involves putting non-OEM
bottles in existing cages. NCG is the
biggest cross-bottler in the US; it generally cross-bottles with Mauser
bottles, which it has in ready supply, and with Schütz outer cages. It doesn’t remove the Schütz name from the
outer cage. According to
defendants—though the court says it’s not relying on this—the cross-bottled
IBCs have been certified, like Schütz IBCs, for transport of hazardous
materials in accordance with the governing regulations.

“Schütz is a staunch critic of the practice of
cross-bottling, generally, and of NCG's cross-bottling using a Schütz cage, in
particular, summing up its views on the issue as follows: ‘retention of the
SCHÜTZ mark on an IBC not manufactured, tested or sold by Schütz confuses
consumers, harms the Schütz brand, poses unclear liabilities, and is an extreme
and unacceptable risk to consumers.’” Schütz
believes that cross-bottling creates a danger that performance failures of a
cross-bottled IBC will be attributed falsely to the original manufacturer,
whose certificates may not have been removed.
Further, Schütz contends that cross-bottling confuses consumers about
who they should contact for service or information. “Finally, Schütz argues
that cross-bottled IBCs are subject to less testing, do not perform as well,
and are of lower quality than non-cross-bottled IBCs.” Schütz has said these things to IBC trade
associations and regulatory agencies as well as to customers.

Schütz sued defendants for trademark infringement, false
advertising, and unjust enrichment based on defendants’ cross-bottling in
bottles still bearing the Schütz mark and on statements that allegedly falsely
equated the quality and performance of cross-bottled products to that of a
Schütz IBC. NCG counterclaimed for false
advertising and product disparagement.

The court first addressed Schütz’s motion for summary
judgment on the false advertising/product disparagement counterclaims. Some statements weren’t actionable under the
Lanham Act because they weren’t made to consumers. The remaining statements were basically
designed to create FUD about non-OEM parts.
(And let me be clear: I have no dog in this hunt and nothing to go on
other than what the court says and a general but not strong skepticism about
OEM claims to special purity.) E.g.: “[T]he
use of non-OEM parts for certain components means that the entire system can no
longer be considered tested and approved: the results of interaction between
original and non-OEM components are unknown.” “Unclear legal, liability, and warranty
questions.” (Sometimes Schütz used
exclamation points.)

NCG argued only literal falsity, not misleadingness. In the full context, the court held, these
statements were part of Schütz’s claims for its own decades of experience and
safety testing of complete systems. The
court found that Schütz’s basic claims were (1) that an IBC with a non-OEM part
“cannot be considered tested and proven,” and (2) that the results of interaction
between original and non-OEM parts in an IBC “are unknown.” NCG argued that this was false, and that
cross-bottled IBCs could be considered “tested and proven,” with known
interactions. NCG’s cross-bottled IBCs
have in fact been tested and certified to transport hazardous materials in
accordance with UN regulations.

Schütz responded that its concerns about “rogue” or improper
cross-bottling was shared in the industry.
Moreover, cross-bottled IBCs didn’t undergo the same testing and quality controls as Schütz IBCs. And as to NCG particularly, Schütz argued
that it sells non-UN/USDOT certified cross-bottled IBCs and that, until 2010,
neither NCG nor the industry generally collected data about the performance of
cross-bottled IBCs.

The court concluded that the statements weren’t literally
false. Many of Schütz’s arguments failed
to hold water, so to speak. Even if
there were industry-wide concerns over cross-bottling or if certain
cross-bottled IBCs weren’t UN/USDOT certified, that wouldn’t mean that cross-bottled
IBCs, “in the absolute, cannot be considered tested and proven, or that the
interaction between original and non-OEM parts is absolutely unknown.” To the contrary, the existence of UN/USDOT
certified cross-bottled IBCs disproved the claim that cross-bottled IBCs
couldn’t be considered tested or proven, and therefore also disproved the claim
that the interaction of original and non-OEM components was unknown. However, a reasonable jury might conclude
that, in context, Schütz was claiming that cross-bottled IBC’s aren’t subjected
to Schütz’s internal testing and
quality controls (and that the effect of the interaction between OEM and
non-OEM parts on performance in those tests was unknown), and thus the
statements were ambiguous. Each statement
appeared in the context of a broader discussion of Schütz’s own design and
testing process.

One other statement remained: “Unclear legal, liability and
warranty questions: … Who is to blame, who is to be contacted?” The court found that this was a nonactionable
statement of opinion, despite NCG’s argument that UN/USDOT regulations governed
the relevant legal and liability issues and mande the remanufacturer
responsible. NCG failed to show that the
regulations made “legal, liability, and warranty questions absolutely clear as
a factual matter. Indeed, as any observer of the legal system knows, the
existence of a law on point does not end all controversy or confusion regarding
the issue it governs. In other words, while a regulation may exist, reasonable
minds can still differ as to the regulation's meaning, scope, or, as in this
case, clarity.” Thus, summary judgment
on this statement was also appropriate.

These holdings were also dispositive of the Georgia UDTPA
counterclaims as to those statements.
NCG argued that statements to non-customers were actionable as product
disparagement under state law, however, and the court agreed: While the
standard false advertising provision in the UDTPA tracks the Lanham Act in
interpretation, its product disparagement provision requires only publication,
following traditional defamation principles.

Schütz then argued that it was privileged to make the
remaining statements, each of which was made to a regulatory agency or trade
association. Under the Georgia statute, “Statements
made with a good faith intent on the part of the speaker to protect his or her
interest in a matter in which it is concerned” are deemed to be privileged
communications, provided that publication isn’t unnecessarily made to people
other than those whom the publisher honestly believes are concerned. Each of the statements did relate to Schütz’s
concerns with the practice of cross-bottling, which Schütz believed to be
harmful to the IBC industry and thus adverse to its business interests. There was no evidence of dissemination beyond
trade associations and regulatory bodies, nor any evidence of malice, and thus
the statements were privileged.

Defendants Mauser and NCG also moved for summary judgment on
Schütz’s trademark claims. They
allegedly infringed by inserting Mauser bottles into used Schütz cages and
selling the resulting cross-bottled product without removing the Schütz
mark. Defendants first challenged Schütz’s
common-law rights in the mark, but the court found that a reasonable jury could
find that Schütz did have secondary meaning in the name; defendants even
admitted that the Schütz name was widely recognized by the relevant
customers. Though they argued that Schütz
abandoned the mark by failing to act against other alleged infringers, there
was no proof of actual abandonment, nor did they show that the mark had become
generic through use by at least six other entities for cross-bottling. Failure to take action against these (whose
number was a matter of dispute), was “woefully” insufficient evidence of
abandonment/genericide.

The next question was what the test should be for confusion:
the multifactor test? Or Schütz’s
preferred alternative, whether there were any material differences between the
parties’ products? “Material differences”
is a limit on the first sale/exhaustion rights that allow people to resell
genuine goods. “[M]aterially different
products bearing the same trademark are inherently likely to confuse.” The threshold for materiality must be kept
low because many considerations may influence consumer preferences. (Here we have an example of a substitute for
the confusion test that favors the
plaintiff, like some early treatments of domain names/keyword ads. Despite its longer pedigree, at least with
respect to products sold to the general consuming public, this test on its face
fails to ask a fairly obvious question: do the relevant consumers know about the material differences and
buy the thing anyway?)

The court was inclined to the material differences test, but
found that under either test there was sufficient evidence from which a
reasonable jury could find likely confusion.
First, there was evidence that the cross-bottled IBC was materially
structurally different and tested to different performance standards, “such
that retention of the Schütz mark is likely to cause consumer confusion as to
the source of the cross-bottled product.”
The UN/USDOT even distinguished using an OEM bottle to repair an IBC from
using a bottle from a new source, the latter of which requires recertification
before it can be used for dangerous goods.

Likewise, under the multifactor test, a reasonable jury
could conclude that retaining the Schütz mark is likely to cause confusion. Intent: Schütz argued that intent to
misappropriate goodwill could be inferred from defendants’ retention of the Schütz
mark on their products, and defendants’ use of Schütz’s name in price quotes. A flyer advertising the Mauser IBC also
depicts it next to a Schütz IBC. The
court found this only “minimally probative” of an intent to
misappropriate. “Because NCG is in the
reconditioning business, and because it cross-bottles, it is not surprising
that quotes to customers would reference cages manufactured by Schütz or other
non-Mauser entities. Similarly, given that the parties are competitors, it is
not surprising that Defendants would show a picture of its product next to
Plaintiff's to highlight the features it contends make its product more
desirable. In short, the evidence cited by Plaintiff is equally indicative of
an effort to compete than an effort to trade on Plaintiff's name.” (Equally? I don’t get how it’s anything other than the
clearest possible disclosure of what defendants have to sell.)

The court also found “little to no evidence” of actual
consumer confusion, mentioning none.
Instead, Schütz argued that under the material differences test, likely
confusion may be presumed. (Because buyers shipping dangerous liquids are
completely careless about the source of their IBCs?) But that wasn’t enough to grant summary
judgment to defendants because the marks were identical and the products were
marketed through the same channels and to similar customers, so a reasonable
jury could still find confusion.

Defendants argued that no reasonable consumer could be
confused given that NCG puts a sticker on the IBCs: “Remanufactured IBC: Original cage and pallet
from Schütz Container Systems provided with a new inner tank manufactured by
Mauser. Remanufacturer: National Container Group. Schütz has not reconditioned
this product and is not affiliated in any way with National Container Group
and/or Mauser.” Mercifully, the court at
least agreed that this sticker would preclude confusion by a reasonable
consumer as a matter of law, holding that, to the extent that the foundational Champion Spark Plugs suggested the
contrary, that language was dicta. Champion stated that a change in a
product might go so far that retention of the original mark would be infringing
notwithstanding use of the terms “used” or “reconditioned.” Here, however, the sticker went well beyond “used,”
and disclosed that the IBC had been remanufactured, with a new inner tank from
Mauser, without Schütz’s contribution. “In
light of the sticker's detailed and explicit contents, the Court finds that no
reasonable consumer could be confused as to the source of a cross-bottled IBC
bearing this sticker.”

There was, however, a genuine dispute of material fact about
whether NCG placed the sticker on every cross-bottled IBC it sold. (By this logic, of course, if NCG showed that
it had explained what it was doing to its customers sufficiently that a
reasonable customer would have understood, there could still be no confusion as
a matter of law.) Along with testimony
generally suggesting that not all NCG cross-bottled IBCs had the sticker, the
court also thought that it mattered that when NCG receives a cross-bottled IBC
only in need of washing, it didn’t apply its own sticker: “if we place the
bottle in the cage, we affix the label. If in six months the exact same
container is returned to us, we do not affix a label.” That was evidence from which a reasonable
jury could find that the “remanufactured” label isn’t affixed to each NCG
cross-bottled IBC. I don’t get it: if
all NCG is doing is washing and not performing any new alteration, how can it
be responsible for any act constituting TM infringement? Also, presumably that sticker would not be accurate with respect to all
cross-bottled IBCs NCG just washes, since there other OEMs and other
cross-bottlers on the market, so why should the sticker be applied to IBCs that
NCG washes? That testimony sounds like
it’s about the defendants’ process when an IBC, from whatever source, is simply
cleaned. Even if the stickers rub off
eventually, I still don’t see how that could lead a reasonable consumer to experience source confusion.

So, despite having kicked out most of the infringement
claim, and provided defendants a roadmap for absolute protection going forward,
the court let the case limp on.

On to Schütz’s false advertising/unjust enrichment
claims. Schütz challenged claims that
defendants’ cross-bottled IBCs were comparable to Schütz’s in terms of overall
condition or performance, e.g., “it is assured that every remanufactured IBC
has a performance that can be compared to that of a new one”; “This program is
your guarantee that the IBC mirrors new units”; etc. Defendants argued that a number of the
statements weren’t disseminated outside defendants’ own corporate entities, and
that others weren’t sufficiently disseminated to constitute advertising or
promotion since they only went to one or two customers or only to non-US
customers.

Schütz argued that statements in documents created for
internal purposes only, which were never sent or presented to customers, were actionable
because similar statements had been disseminated to customers as part of a
broader ad campaign, according to depositions of sales reps. The court disagreed; “commercial advertising
or promotion” requires dissemination to consumers. “[T]estimony that a general message is or has
been conveyed to unspecified customers, at an unspecified time, in an
unspecified manner, and by unspecified persons is insufficient to satisfy the
threshold requirement of a Lanham Act claim--that the accused statements were
made in ‘commercial advertising or promotion.’”

Were statements made to customers sufficiently disseminated
under the standard test for advertising/promotion? Schütz argued that Mauser used a standard
PowerPoint template for its customer presentations, while defendants argued
that the identified statements were only made to one or two customers. A key question was whether the accused
statement was part of an organized campaign to penetrate the relevant market,
as opposed to isolated statements by sales personnel to individual customers. Here, Schütz failed to present sufficient
evidence that would allow a reasonable jury to conclude that the particular identified
statements had been sufficiently disseminated.
It identifed statements made to only one or two customers, and it didn’t
put forward any evidencce about the number of potential customers in the IBC
market or the size and importance of the customers to whom the statements were
made. (I don’t see why you couldn’t put
this evidence together with the deposition testimony that product equivalence
in performance would be part of the sales pitch to conclude that a reasonable
jury could find sufficient dissemination.)

Defendants sought summary judgment on the remaining
statements in brochures and on NCG’s website, as to which Schütz also argued
only literal falsity. These statements
claimed that defendants restore used IBCs to their “original” conditions or
performance standards, e.g., “We clean it [container] completely, conduct
thorough inspections, and replace worn closures, thus restoring the container
to its original condition. So you can depend on getting exactly the performance
and quality you bargained for.” Defendants argued that, since they didn’t
mention cross-bottled IBCs specifically in these statements, the statements
couldn’t be literally false.

The court disagreed: “the statements need not explicitly
reference cross-bottled products to be found literally false with respect to
them. The statements unambigously assert that NCG restores all of its products
to their original condition when it reconditions them. This would include
cross-bottled products.” So, based on
the summary judgment, could a reasonable jury find these assertions to be
literally false as applied to the cross-bottled products at issue? Schütz argued literal falsity because the
resulting product is materially different: a Schütz bottle has been replaced
with a Mauser bottle, when NCG could in theory replace a used Schütz bottle
with another Schütz bottle. The bottle
designs are different, and the Mauser bottle’s indentations don’t match up with
the bars of the Schütz cage. Thus, the
resulting IBC “is of a different design and cannot be said to have been
restored to its original condition.”
This was sufficient for a reasonable jury to be able to find falsity. As to performance, Schütz also argued that
NCG’s cross-bottled IBCs don’t perform as well as the original, according to
tests by its expert. This was also
enough to create an issue of material fact.

Defendants also contended that Schütz couldn’t prove injury
or a causal link between the injury and the accused statements. The court held that Schütz wasn’t required to
prove actual injury to prevail on a false advertising claim.

Because TM and false advertising claims survived, so did the
state law unjust enrichment claim. There
was evidence that defendants benefited from the alleged wrongdoing through
increased customer accounts and sales.

Wednesday, April 25, 2012

Cogent Solutions Group and Hyalogic compete in the joint
supplement market. Hyaluronic acid ("HA") is a key component in their
respective products. In 2011, CSG sued Hyalogic and another company for
misleading ads, primarily focusing on the defendants' use of a
"Competitive Analysis Chart" comparing the competing products. The
parties settled shortly thereafter, and defendants agreed to remove all copies
of the chart from circulation. They also
agreed to refrain from making "false or misleading statements about the other
[p]arty's products," and Hyalogic agreed not to say that Cogent’s product
Baxyl contained preservatives that break down hyaluronan, a key ingredient.

CSG argued that Hyalogic breached the settlement based on a
YouTube video of a speech given by Dr. Karen Brown at a trade show, and based
on Hyalogic’s alleged failure to timely remove the chart from circulation. The court found that CSG failed to prove
breach.

The liquidated damages provision of the settlement agreement
listed statements that, if proven by clear and convincing evidence to have been
knowingly used by Hyalogic in print for sales or marketing purposes, would
result in damages. The statements
included claims that Baxyl was not bio-available, couldn’t be absorbed
sublingually, or might have a pro-inflammatory effect, along with claims that
the human body can only absorb 3 mg or HA or that the joints only need 3 mg of
HA.

First, CSG couldn’t show by clear and convincing evidence
that Hyalogic was responsible for the YouTube video. Hyalogic argued that it was posted by an
unrelated Malaysian company. CSG
responded that Hyalogic’s website had contact information for many
international partners, including Malaysian ones. That was only enough for a weak inference,
not clear and convincing evidence, especially when Hyalogic’s affidavit
specifically stated that the only relationship between the companies was that
the Malaysian company sold Hyalogic’s products.

Second, CSG couldn’t show that a verbal statement in a
YouTube video was “in print.” Settlement
drafters, grab your track changes: “noticeably absent from the plain language
of this clause is the term ‘Internet,’” which was especially important because,
in another part of the settlement agreement, Hyalogic agreed to make changes on
the chart on any future use "in print or on the Internet." By inference, internet uses weren’t covered by
the liquidated damages provisions.

Third, CSG couldn’t show that the statement was used for
sales or marketing purposes after the date specified by the agreement, May 17,
2011. The videos were originally put on
Hyalogic’s website in June 2010, and were unchanged after the settlement. Thus, the YouTube video was “in the public domain”
prior to the key date, according to the court.
(I don’t get why this is a separate reason than the rationale that
Hyalogic was not responsible for the Malaysian company’s use.)

CSG separately alleged breach of a separate prohibition on
false or misleading statements about CSG’s products. The court again found no breach. The YouTube statement that Hyalogic’s product
is “more than 6 times that of the competition” wasn’t enough: Hyalogic presented
a sworn statement that there were at least 13 other liquid HA supplements on
the market competing directly with the parties’. Thus, the YouTube statement didn’t contain
the necessary reference to the “other Party’s products”—a reference to “the
competition” wasn’t enough. Likewise,
references to “others” who “use preservatives and fillers that break down HA in
their product” were insufficient.

Nor did CSG show that Hyalogic failed to make its best
efforts to remove the chart attacking CSG from circulation. It didn’t show a single instance of Hyalogic
using the chart post-settlement.

Finally, CSG argued that Dr. Brown’s statements in the
YouTube video were false and misleading, such as "you only need ... 3
milligrams." Even assuming falsity,
it wasn’t an explicit reference to CSG’s product, given the other products on
the market. CSG argued that the
reference was targeted, because she spoke about "competitors" that
"use citric acid and/or potassium sorbate as preservatives," and two
out of the three products that contain trace amounts of these preservatives are
made by CSG. But Hyalogic’s sworn
statement said that there were 9 such non-CSG products, and there still wasn’t
a specific reference to Baxyl.

Stanley brought a putative class action under the CLRA and
UCL as well as for breach of express warranty, based on Bayer’s sales of
probiotic supplements. Her doctor
recommended probiotics for diarrhea, and she bought Bayer’s caps on her
pharmacist’s recommendation. She also
read the outside of the box, which said, “Helps Defend against Occasional
DIARRHEA.” She used the product for 6-7
days but stopped when she got no relief.
Her claims covered the caps along with variants sold as a supplement and
as fiber. All the products prominently
claim benefits to digestive and immune health.

Stanley argued that Bayer’s claims lacked scientific or
clinical substantiation. Bayer moved for
summary judgment on the ground that lack of substantiation is not a basis for
relief under the UCL or CLRA. The court
agreed that it was the plaintiff’s burden to show falsity or misleadingness,
and that there was no private cause of action for substantiation. Only public authorities can seek
substantiation under California law to prevent undue harassment of advertisers
and provide the least burdensome method of obtaining substantiation.

The court noted that material omissions could found a
private claim if the defendant had a duty to disclose. Stanley’s basic argument was that the health
claims themselves inherently, and here misleadingly, implied scientific
substantiation. In particular, she
argued that the claims were misleading because there was insufficient evidence
to support the general claim that the product

promoted overall digestive health and helped defend against
occasional diarrhea and other gastrointestinal problems, and because Bayer
didn’t conduct strain specific studies of the 3 strains of probiotics in
combination, as touted on its packaging and in ads. (The claims included “Contains the most
common and most studied bacteria for digestive health (Lactobacillus and
Bifidobacterium which closely resemble your body's natural good bacteria),” and
“There's scientific evidence that Lactobacillus and Bifidobacterium help
relieve gas, diarrhea, constipation and other GI discomforts.”)

Stanley contended that the weight of the evidence from
peer-reviewed, double-blind, placebo-controlled studies suggested that
probiotics have little effect on digestive or immune health. However, none of her experts opined that the
claims “Helps Defend Against Occasional constipation, diarrhea, gas and
bloating” or “promotes overall digestive health” were actually false or
misleading.

Scientists are likely to sigh at this, but the court
concluded that “At his deposition, [one of plaintiff’s experts] testified that
probiotics may provide benefits to some people,” based on his testimony that
the results of studies varied dramatically.
Asked, “So in essence are you saying here, then, that probiotics provide
health benefits to some people and … don't provide health benefits to others?”
he said, “You can't say, because of the variation. There's no—you can't
scientifically conclude anything.” Asked
“So you can't rule out that probiotics do work for some people?” he said “It's
inconclusive.” xkcd covers this better than I ever could, on the
related issue of significance. (This is
not to say that there weren’t weaknesses in the expert opinions; the court
suggested that there was some gobbledegook involved, and the experts apparently
didn’t review the articles on which Bayer relied for its claims.) Another plaintiff’s expert more clearly said
that probiotics can benefit some people and harm others, or help the same
person at some times and harm at others—though the court thought that was
detrimental to Stanley’s case, it seems to me that a reasonable person might
consider there to be a significant difference between “this product helps
support digestive health” and “this product might help support digestive health
or might harm it, and we don’t know how to predict who experiences which
result.”

Because the court thought this case was essentially about
lack of substantiation, it just said that there’s no private cause of action
for lack thereof, rather than addressing the idea—which competitors have
occasionally had some success with in Lanham Act cases—that a health claim
inherently contains implied representations about substantiation, which can
then be misleading.

Stanley also couldn’t show a genuine issue of material fact
about whether Bayer complied with federal standards for substantiation,
assuming that this would be “unlawful” under the UCL. Because it’s a dietary supplement, Bayer
isn’t required to do much. It submitted
the structure/function claims to the FDA as required and the FDA didn’t
object. Plaintiff’s expert lacked the
regulatory expertise of Bayer’s expert and couldn’t explain why Bayer should
have been required to do more.

Stanley’s reading of the statement “helps defend against
occasional diarrhea” as promising that she would get relief from her diarrhea
wasn’t evidence of likely deception. The
side panel said “[t]his product is not intended to diagnose, treat, cure, or
prevent any disease,” and her doctor, though recommending probiotics, didn’t
recommend Bayer’s product in particular.
Nothing on the package etc. represents that it would relieve diarrhea; a reasonable consumer
wouldn’t be misled into believing that it was a diarrhea medication, especially
since there are a host of products on the market to treat ongoing
diarrhea. Thus, there was no evidence
that the product didn’t work as advertised, “to promote overall digestive
health and to defend against occasional diarrhea and other gastrointestinal
issues.” Nor did Stanley identify
exactly what Bayer should have disclosed other than that, to be effective, the
product would need to be taken continuously for an unknown period; the
packaging itself says it’s a “daily” or “everyday” supplement.

The court then turned to Stanley’s arguments that the
packages affirmatively represented that Bayer conducted clinical studies of the
combined effectiveness of the 3 probiotics.
The back of the 45-count caps says “[c]ontains a proprietary blend of 3
clinically tested strains of good bacteria.”
But the back of the 30-count caps, which Stanley bought, didn’t have
that language, and she didn’t recall reading or relying on any claims other
than the diarrhea one on the front of the box.
Bayer made a similar claim to pharmacists, but not to the public, and
there was no evidence that Stanley’s pharmacist saw the letter.

Stanley’s express warranty claim also failed because nothing
on the product warranted that use for 6-7 days would relieve her diarrhea.

Monday, April 23, 2012

Leonetti’s sells stromboli throughout the mid-Atlantic
region, and from 2000-2007 made stromboli for Maglio Fresh Food. Defendant American Kitchen makes ready to eat
foods as private label/store brands. In
2007, it began making stromboli for Maglio, which distributed them through the
same region. Leonetti’s alleged that
American Kitchen’s versions had different ingredients and nutrition facts, were
folded differently, looked substantially different, and were made using less
meat and less expensive ingredients, but American Kitchen nevver advised its
customers of the change.

In 2010, Leonetti’s allegedly discovered that American
Kitchen was distributing stromboli under the same packaging that Leonetti’s had
used to distribute Leonetti’s stromboli under the Maglio brand. Leonetti’s argued that it didn’t give
defendants permission to use the images of Leonetti’s hand-made stromboli to
market the new products. American
Kitchen’s use of pictures, ingredients, and nutrition facts for Leonetti’s-made
stromboli allegedly prevented customers from learning that the stromboli had
changed and allowed American Kitchen to continue to benefit from the goodwill
created by Leonetti’s previous production of premium, hand-made stromboli for
Maglio, allegedly misleading retail and food service customers.

American Kitchen allegedly learned of customers’ complaints
about the new products in 2007-2008.
Sysco requested samples from American Kitchen and Leonetti’s. American Kitchen allegedly obtained
Leonetti’s samples to use as a model, and its samples then contained more
ingredients, were handmade, and were folded differently than American Kitchen’s
actual stromboli. But for this
deception, Leonetti’s alleged, it would have obtained the Sysco account, and
Leonetti’s alleged that American Kitchen did the same with samples to other
customers.

In 2010, the USDA investigated American Kitchen to see
whether it used accurate and properly approved labels for the stromboli it made
for Maglio, and found that American Kitchen lacked proper approval. Despite this, Leonetti’s alleged that
American Kitchen made at least 3 shipments of stromboli using rescinded labels,
and never stopped sending stromboli to Maglio using the rescinded labels.

Most of a year later, after having obtained new label
approval from the USDA, American Kitchen began using new boxes. Leonetti’s alleged that the new boxes used
pictures that were substantially different from the products inside, with
samples submitted to a photographer that contained additional ingredients and
were folded differently than the actual stromboli. Leonetti’s alleged that this
misrepresentation continued to harm it by confusing consumers and increasing
American Kitchen’s sales.

First, the court noted that district courts in the Third
Circuit have applied an “intermediate” pleading standard to false advertising
Lanham Act claims (why not TM claims? because TM is favored over false
advertising, apparently; don’t ask for a reason). Since Leonetti’s alleged that American
Kitchen made false statements, it was important to provide sufficiently
detailed allegations to allow a proper defense.
Leonetti’s allegations were indeed sufficient to meet this standard.
Further, Leonetti’s sufficiently alleged literal falsity: that the photos and
nutritional and ingredient information on the packages didn’t correspond to the
stromboli in the boxes. It didn’t matter
that Maglio’s name was on the packages and not American Kitchen’s, since false
representations about another person’s goods are also barred. Moreover, other cases have found that it’s
false advertising for the defendant to use pictures of a plaintiff’s product to
sell its own when the pictured product wasn’t identical to the one the
defendant was prepared to deliver.
American Kitchen argued that the photos were generic, but they were “clearly
intended to represent the stromboli contained inside the boxes—the stromboli
manufactured by American Kitchen—when, if Leonetti's allegations are true, they
did not.”

The court also found that the photos and information on the
boxes were sufficiently alleged to be “commercial advertising or promotion,”
using the standard test: Leonetti’s plausibly alleged that they were “designed
to influence customers to buy” and “sufficiently disseminated to the relevant
purchasing public to constitute advertising or promotion within the industry”
(as one would think the package would have to be), for over four years. Photos and labels are primary means of
promoting the stromboli when customers can’t taste before purchase. “If the packaging in question were merely
functional and not intended to also promote the product within, there would be
no need to include anything other than identifying information on the box
(i.e., a label unadorned by photographs, noting only that the box contains
‘stromboli’ and including required nutritional information would suffice).
Instead, on the package in question, embellished text next to a glossy
photograph of a cheese and pepperoni filled stromboli induces potential
customers to ‘Taste the Tradition.’”

As one does these days, American Kitchen also argued that Leonetti’s lacked prudential standing. The court disagreed: Leonetti’s alleged that both manufactured strombolis for sale to food service and retail customers, whether under their own names or private labels. Moreover, the court found that the Conte Bros. test was satisfied: (1) the nature of the alleged injury was lost sales/goodwill due to false advertising, exactly what the Lanham Act targets; (2) the asserted injury was sufficiently direct; (3) Leonetti’s was proximate to the alleged injurious conduct given that Leonetti’s alleged a direct impact on its ability to sell its own stromboli; (4) even if damages were speculative, they were sufficiently pled; and (5) there was little risk of duplicative damages or complexity in apportioning damages because the market for stromboli was not alleged to be complex and recognizing Leonetti's right to bring a damages action was not likely to “subject the defendant firm to multiple liability for the same conduct and result in complex damages proceedings.” (Even recitations of successful traverses of Conte Bros. make clear how overlapping the factors are and how inappropriate these considerations are for motions to dismiss.)

American Kitchen also tried the doctrine of primary
jurisdiction, suggesting that the complaint should be dismissed because there
was no allegation that the FTC had determined that the USDA label on the boxes
was misleading. Nope. “Although conclusions made by the FTC or the
USDA with respect to information included on the stromboli labels might
ultimately affect American Kitchen's defense against Leonetti's claims, the
issue before me is not whether the labeling on American Kitchen's stromboli
complied with FTC or USDA regulations.”
Falsity/misleadingness was a matter within the court’s competence.

Abarca sued PharmPix and others for copyright infringement,
Lanham Act violations/trademark infringement, misuse of trade secrets, and so
on. PharmPix counterclaimed for
violation of the Sherman Act and Puerto Rican law; the court dismissed most of
the counterclaims, but I’m only going to look at the Dastar aspect of the ruling.
“These claims arise out of a tangled dispute regarding the parties'
conduct in the pharmacy benefits industry, touching on their alleged use of
computer software, misappropriation of business plans, and communications with
prospective customers.”

PharmPix makes web based pharmacy benefit management (PBM)
software, for which it has registered a copyright. Abarca allegedly told various “peers and
clients” that it was going to sue for copyright infringement, allegedly to
prevent PharmPix from doing business.

Although Dastar
purported to allow certain false advertising claims, it “did not invite
plaintiffs to recast their false authorship claims in the style of false
advertising. Courts presented with similar claims post-Dastar uniformly look past the plaintiff's nomenclature and test
whether the ‘characteristic’ or ‘quality’ that is allegedly misrepresented is
simply the product's creative authorship.” Abarca’s claim was that PharmPix misleadingly
claimed to have an “innovative” “proprietary” software application. While “proprietary” is just about ownership,
Abarca’s challenge to “innovative” could fall outside Dastar, though it might fail at the summary judgment stage.

What’s on the other side of the boundary? It’s not the case that overlap alone for its
own sake is problematic. Why is TM the
bad guy here that has to give way? The
value judgments are in play because TM’s structure is (1) less explicit about
freedom to copy as a value, with the bargain expressed more explicitly with
other regimes, and (2) less certain about what TM is for. Tidy boundaries are a means not an end,
embodying value judgments.

We spent a lot of time on aesthetic functionality and Dastar.
Other overlap issues were mentioned—what about TM extensively
overlapping with other regimes when we let it do so? E.g., defamation and dilution. Celebrities in ads: federal and state infringement,
federal and state dilution, false endorsement, defamation, and right of
publicity are all possibilities. Maybe
we don’t have the same concerns about freedom to copy the celebrity, but why
not talk about our willingness to get rid of these overlapping rights (no int’l
barriers to doing so in comparison)?
Maybe we don’t think that the redundancies there are troubling—value
clashes/inconsistencies. (That’s
unlikely to be true! TM’s boundaries
look a lot better than right of
publicity’s, though.)

Boundaries also help you think about what the interior is.

Jessica Litman: goal is to improve results in real
cases/prevent bad cases from being filed.
Legal realism must creep in: if TM owners can tell a free riding story,
finders of fact will be sympathetic. (I
wonder how inherent this is. There are
some people whose efforts seem to be free to ride on, because of ideas about
contract and (presumed) consent. I don’t
think those have always been the same sets of people even in the past 100
years, so is there room for change?)
Some best tools are not doctrinal but stories of overreaching and
greed. The flyonthewall case: the court
says “no further.”

International harmonization might help sell the idea of
limiting §43(a) to false representations and not protecting unregistered marks;
it’s not very doctrinally pure, though, and she’s grabbing at an available
tool.

Primary Discussants: Michael Grynberg

Distinction between learning from another doctrine and
blindly importing from another doctrine. Consider the regulatory nature of a
lot of consumer protection law—often administered by an agency. One boundary in
IP should be a greater appreciation of the power dispensed by
courts/legislatures to private actors to exercise a kind of regulatory power.
We have skepticism about this delegation in admin law; have evolved doctrines
to ensure that they exercise it legitimately.
You see some attempts to limit the scope—Tushnet’s written about
prudential standing in false advertising—but the principle that we should be
careful who we let muck around with the free market—is a sound one. This may also help explain the appeal of
materiality.

Copying elements of trade dress/keywords as a way to
communicate category similarity: I am like X.
Mostly people in the room think that’s salutory, and if communication of
similarity is false we can deal with it through false advertising. If you’re
communicating “I’m a generic of drug X,” we might have more discomfort
offloading that to false advertising but since we have the FDA behind this it’s
not troubling. We are making an implicit
judgment of the quality of an underlying regulatory regime in another
area. If such cases are common, which
they might or might not be, we have to consider the state of play in other
areas of law (*cough*antitrust*cough*).

Mark Lemley: Tendency to interpret boundaries as
“limits.” Boundary against what? It’s one thing to say TM stops and something
else starts, and another to say TM just stops (and then perhaps the right to
copy/compete begins). Articulating
what’s on the other side of the border helps our theory of why we want to limit
TM law.

Group of TM lawyers: no one actually questioned supremacy of
patent/copyright in cases of conflict.
Why? Could tell a constitutional
story, but not clear that works given the Commerce Clause. Could tell a historical story: longer
pedigree, though that too isn’t necessarily satisfying. Could tell an earlier vesting story: you don’t
get TM until well after whatever actions would have vested a patent/copyright,
though after ITU it’s not clear that story works either. Maybe TM just has a less well articulated
theory of the public domain—but he thinks patent and copyright don’t have them
either, and to the extent articulated it’s been done so in a statutory vacuum.

We do presume TM dominates state and common law doctrines,
and to the extent that unfair competition/misappropriation runs afoul of TM’s
animating principles, TM wins out. Maybe a federalism story makes sense, but
he’s been thinking about maybe a numerus clausus principle for legislation
protecting IP. Maybe we need not one but some limited number of some legal
regimes and 10 causes of action might not be the right number.

Starting to question whether we need 2 functionality
doctrines. You can articulate the rationale/desirability of functionality in a
single unified way, which might help a.f. not be treated as the poor
stepchild. Part of that articulation
might not actually be most desirable as a boundary condition, channeling
patent/copyright and TM, but instead as an intrinsic limit. Boundary conditions
make the implicit assumption “there’s got to be some law out there that
protects this thing,” but that’s corrosive to the idea that market competition
is the default unless there’s some significant market failure. Right to copy as a right against which we
must bump up is needed if that’s the boundary.

Dogan: patent in particular tends to come in tension w/TM
only in product configuration trade dress. Assumption that patent trumps comes
from idea that TMs are about information, and there’s some widely shared
skepticism about how much info is actually conveyed by design and how hard it
is to convey that info by alternate means. Thus the benefit gained from TM
feels thin relative to the costs of granting TM protection over things that
could threaten patent values. False
positive mistakes are costly and true positives are not all that beneficial.

Lemley: he gets that because the protection is at the fringe
of TM anyway; but what about copyright?

Dogan: much harder in copyright. Had different instincts about copyrightable
works created as logos v. use of Snoopy, created for other purposes, then
transferred into TM by licensing.

Functionality convergence: attractive but comes with
risks. It does seem like the right thing
to do but Lemley thinks it will make a.f. more robust and it might actually
water down Traffix functionality if
courts have to define it. We think: any
time a feature adds utility, it should be functional. That’s appealing, but as
a practical matter courts have too much accumulated case law that it’s ok to
pick an attractive feature as an identifier and that we should encourage people
to choose attractive trade dress.

McKenna: you don’t have to make judgments about other
regimes. You should say ‘this doesn’t
belong in TM, and if some other system isn’t working then we should fix that
system instead.’ Why TM gives way: it’s
TM that has grown into patent’s space and not the other way around. It’s not
that patentable subject matter has expanded, it’s encroachment into patent’s
area. Lemley: copyright is tougher. McKenna: agreed. We have trouble figuring out how this would work
in copyright. But one could imagine
focusing on boundaries in copyright law—useful articles; limiting protection
for logos (which used to be the case!).
Staying out of each other’s space need not create a rank ordering. (Feminist me is skeptical of this claim.)

Grynberg: Litman says courts don’t necessarily care about
working doctrine pure; Grynberg thinks that they can be attracted to doing so
in appropriate circumstances. That’s a
consideration in thinking of “this isn’t TM’s job” as an argument.

Kur: in logos/labels, copyright has grown into TM, but
that’s not watertight.

McKenna: he’s just making a descriptive argument.

Kur: don’t build a hierarchy on that gut feeling.

TM law doesn’t protect something valuable as
such/achievement as such. Everyone is free to copy the thing designated by the
TM, but must use another sign to indicate origin. Thus the interference with first-order
creation/competition is less. Only true
insofar as acquisition of TM remains competition neutral in the sense of not
giving competitive advantage to registration. General theory is that this is not
the case because TM signs exist in infinite numbers and a different one isn’t
competitively disadvantageous. But that’s not true—some signs are limited. Colors, descriptive designations, shapes. Implications: no registration for
configuration without secondary meaning, contrary to current EU approach. (Discussion: there is not formally a
post-sale confusion doctrine in the EU, but some suggest it is coming soon.)

Dinwoodie: before functionality was added to defenses to
incontestability, US courts got around that by calling functionality
descriptiveness.

Kur: “used as a mark” can also be deployed this way.

Bently: ECJ has ruled out descriptive use in this way in a
case concerning toy replicas of cars (though did use “use”).

Barrett: Rosetta Stone district court was following that
instinct, but used the wrong label. More
sense to say use is a fair use. It’s the
nature of d’s use that matters.

Dinwoodie: benefit is also that it doesn’t knock out p’s
mark in its entirety.

McKenna: it doesn’t fit in any of these existing boxes—it’s
all the same instinct, d’s using this for something other than source.

Dinwoodie: Kur suggests you can fit it in the box if you
understand “descriptive” in a non-literal sense.

Kur: words and drawings can all be descriptive.

McGeveran: so the Louboutin red sole is describing red?

McKenna: if you can use descriptive this way, why not
functionality?

Dinwoodie: Vornado
uses descriptiveness this way.

McKenna: interesting that we want a harder meaning for
functionality.

Dinwoodie: but that’s because of the consequence of
invalidating the mark.

McKenna: that need not be the consequence! (This is my Louboutin argument.) Courts
are the ones that created the consequence.

Bone: but we run up against the expectation that it would invalidate
the mark. So why not shift over to fair
use, which might also accomplish the result more effectively. True that we don’t have to make functionality
work that way.

Lemley: but to use fair use we have to change the parameters
of that doctrine too.

Dinwoodie: true, requires more expansive reading; but if
courts are conceiving of product designs as descriptive, it’s not alien. Shakespear/Silstar
was a classic example because they couldn’t
use functionality as a statutory matter at the time.

Dogan: if there’s actual passing off, the court should be
able to require labeling. A cleaner way of getting there than saying the thing
is protectable and that people acting in good faith to copy it.

Litman: cleanest way is to say these uses don’t cause likely
confusion.

Lemley: but we have to take that to trial.

Heymann: we want to say even if they do cause a little
confusion it’s still fair use.
Descriptive fair use is like that, use of generic terms with de facto
secondary meaning, etc. Unify a bunch of
different kinds of activity that are appropriate even if there is some
confusion.

Janis: design patent law: there are two types of
functionality—a line of cases that uses functionality to restrict scope, as
well as to invalidate rights. So it’s
conceivable to do that though it’s sub silentio.

Bone: why copyright ought to trump TM in certain respects:
one intuition is legislation v. common law. We think of copyright fair use as
being a fairly well crafted statute that tries to strike a balance—at least a
legislative effort—between protection and copying. While the Lanham Act is so heavily common
law; there may be less willingness to intrude in copyright. (But as Litman has pointed out, most of the
expansion of copyright came from the courts too, so that is a story but it
doesn’t track the cases.)

Boundaries are, in theory, defined in more general terms than
other limits, which tend to be more case by case. Our boundary doctrines tend to be
case-focused though. Some case-specific
things may not be about boundaries.

Sheff: going back to distinction between info with value in
itself and info with value that can be realized in other ways because it’s
functioning as source indicator and there’s always another source indicator you
can use. Does that mean that these distinctions should be embodied in limits on
subject matter? Scope? Defenses? Just
the remedies? Maybe the last is the most
promising.

Grynberg’s point on consumer protection regulation: the
interesting Q in that boundary is what conditions are necessary to get the
administrative state to move on consumer protection, which may be industry
specific. Industries in which TM is
alive and well, but there’s some other uncorrected market failure requiring
command and control. TM not only serves
as info facilitator but can also serve to manipulate consumer decisions in ways
that lead to undesirable results, and food and drugs are clear examples of
that. Marketing can influence decisions
even if not “unfair competition” in ways that lead to very high social costs.
That might trigger the regulatory state. The boundary problem is identifying
those industries/those conditions.
Perhaps we need to say TM is not enough and we need additional measures.

Dinwoodie: note that in Australia Google got hit by the
regulators for unfair competition in keyword ads. So we have to ask institutional questions of
competence.

Both Dastar and Samara, the Court says, don’t worry
there’s another regime out there to take care of abuse. This helps make design
patent relevant—but are we comfortable that design patent is effective in the
US?

Why prefer patent/copyright to TM? Maybe we need to kick stuff out of copyright
where TM does a better job. Two examples of kicking copyright to design
instead. Britain has a slightly strange
rule that Kur now thinks invalid: restricts term of copyright once there’s an
industrial application. If you look at conceptual separability: the idea was to
push these claims into the design regime, not destroy them entirely.

Lemley: Omega is
an obvious case—copyright is treading on TM’s territory.

RT: Actually, when it comes to tobacco and marketing unhealthy
foods to kids, activists and increasingly regulators, though mainly not in the
US, say TM should not be allowed. Plain
packaging and ad restrictions are about pushing TM out of the realm of certain
segments of the market.

My note re: functionality.
McCarthy attempts to unify it too!
He does it differently than watering down Traffix functionality, but by talking about market demand and
pretending there’s no such thing as a.f. while still using the a.f. cases to
define the scope of functionality. That’s
worth noting as a possible outcome of unification as well.

McGeveran: will courts go for the broad definition of “utility.” We talk about what “courts” generally would
be willing to do; the Supreme Court
might well be willing to do this if there were proper briefing. If we had an impact litigator willing to try
to fix TM, you could design the kind of case to address these problems. The SCt seems to have a very different view
of freedom to copy than the circuit courts, especially the Fed. Cir. Doesn’t know why that is, but descriptively
true, and it’s a prescription for anyone who actually wanted judicial reform.

Lemley: possible theory: SCt views its job as articulation
of principles across cases, at least in theory. Lower cts view their job as
resolving cases on facts in front of them. Latter makes you more susceptible to
bad facts/free rider feelings. Clearly
not always true, but harder to articulate “free riding bad” as a general
principle.

McKenna: note that these cases are never close.

Janis: SCt also sees itself as the arbiter of boundaries—taking
cases framed as boundary cases.

McKenna: and it sees patent cases and the 7th
Circuit doesn’t.

McGeveran: boundary framing as a useful rhetorical tool in
amicus briefs and so on?

Austin: we are compartmentalizing what we see as the SCt’s
drive to enforce a right to copy from regulatory responses that occur outside
the IP appellate decisions. (Also Golan, which can be seen as affirming
such a regulatory response.)

McKenna: dangerous to keep things in TM because we think the
other schemes aren’t working because of the collateral damage to TM.

Dinwoodie: there has to be some affirmative justification
for applying TM—secondary meaning of a product design, for example. But since that also creates problems we can
think about whether there are other better regimes.

Sheff: the problem is that allowing TM protection for
harmful medicines/devices leads to bad results, which can be dealt with not by
limiting TM protection but by setting up a collateral regime to address the bad
results in the industry.

RT: I think there’s some ground here to think about the
right of publicity/false endorsement, which we haven’t talked much about—courts
are hopelessly confused about whether false endorsement is a matter of
§43(a)(1)(A) or (a)(1)(B), and that’s no surprise.

Dinwoodie: but it’s picked up because there’s some
justification in TM.

Dogan: bleed between false endorsement and the right of
publicity. NCAA cases: you see the players saying ‘the NCAA is getting paid, so
we should get paid too.’ That’s not
without intuitive appeal.

McKenna: that’s the basic RoP theory.

Dogan: but it’s reinforced by the breadth of TM rights—if TM
holders are getting paid, that’s juxtaposed to the unpaid use of the players’
images.

Lemley: but that’s contextual. Universities sell T-shirts and tickets, and
no one looks at that and says the students have a RoP to share in those
benefits.

Dogan: but it’s a self-reinforcing.

Lemley: and it’s about framing. In many other contexts we accept the
asymmetry.

Heymann: you see bleed the other way too; in L’Oreal you see
the 7th Circuit say the RoP requires false endorsement. (That’s TM trumping RoP, it seems to me, if
we want to talk about supremacy.)

Bone: suppose a TM owner licenses a symbol, but it turns out
that there’s no protectable mark. Is the contract still enforceable? (E.g., the Facebook ToS.)

McKenna: licensee estoppel?

Lemley: that was thrown out in patent law because of a
policy judgment that we want people to challenge overbroad/invalid patents.

McKenna: hasn’t been accepted in TM cases.

Bone: Market solutions can come in to provide consumers with
info, not just regulatory solutions.

McGeveran: a lot of RoP cases would be subject to nominative
fair use; you’re reporting facts about Lew Alcindor; the court’s just not
interested in that as a limit.
Interesting that a regime on the other side of TM that doesn’t have
baked into it any acceptance of freedom to copy, resulting in no pressure to
manage the boundary between TM and RoP.

Mid-point summary: Eric Goldman

Absolutist: TM law is designed to fix only specific defects
in a marketplace. Of course TM law does
much more than that, and he’s not trying to go back to some halcyon time, but
he does think that first principles can help.
Institutional competence question is quite helpful. We know that competitor lawsuits are an
essential part of an advertising regulatory system—competitors know what’s
going on and are willing to sue to protect their interests, but there are also
defects in relying on them because they don’t put consumers first. That’s why we have agencies designed to
enforce for consumers where industries are more likely to collude/ignore
falsity; that’s also why we have consumer lawsuits, foreign TM; then we have
certification bodies/private solutions; and the market itself can correct some
problems. TM fits into a broader advertising law space. Might be empowering to know TM doesn’t have to
be everything to everyone.

He’s a big fan of tidiness for tidiness’ sake. And he thinks tidiness diminishes transaction
costs.

TM as regulatory mechanism to shape the behavior of
potential TM owners when they select their marks. He is very keen on this
notion. Producing behavior rather than merely reflecting it.

How TRIPS-compatible is US false advertising law, with our
without Litman’s suggestion? Although Paris
Convention art. 10bis is not very
clear, might not be compatible. What
would it be like without protection for unregistered marks? Huge explosion in
application for registration? Difficulty policing marks, though will force ex
ante specificity. But TM office won’t
really look for aesthetic functionality ex ante, especially when many marks
turn out to be completely valueless.

Litman: there’d be transition problems, as well as First
Amendment problems from things like exclusion of disparaging marks from
registration.

Bently: Registration has its own fears and costs. Registered product designs have chilling
effects too.

Kur: has been threatened with suit for mentioning a TM as an
example of a bad case—use for teaching purposes, noncommercial purposes, etc.
should be thrown into discussion as explicit exceptions/limitations as a
charter of users’ speech rights applicable across IP rights.

Lemley: the problem with regulatory agencies is that they
tend to regulate. It’s what they do.
Australian Competition Commission ruling on Google: wasn’t that supposed
to promote competition? FTC having a
false advertising mandate is fine as actually experienced, but there’s a real
worry about bringing in a regulatory agency with concurrent/overlapping
authority because the end effect is more restriction on freedom of competition.

RT: What we fear depends on where we stand. Don’t think anyone is suggesting roving TM
enforcement, but FTC also does antitrust; maybe the enforcers should take
harder looks at anticompetitive uses of TMs.

Heymann: thinking more concretely about
overlaps/conflicts. I can perform Romeo
& Juliet without permission, but not in the middle of 5th
Avenue. That’s unobjectionable. Why are
some overlaps more objectionable? Is
there a higher order consideration about the First Amendment or the public
domain?

Think about how we educate our students. The classic
issue-spotter: here’s a set of facts; identify as many causes of action as you
can. We’re training them to be plaintiff’s
lawyers and cautious defense lawyers.

Goldman: You could say “what’s the best theory, what’s the
best defense” and still have an issue-spotter.
Never underestimate the costs to people who want to do the right thing
in the market but can’t figure it out.

Some discussion of fee-shifting in cases where there are
some successful claims and some unsuccessful, though Lemley notes that often
success is all or nothing at least in patent cases.

McGeveran: multiple theories are a problem when they aren’t
doing independent work. That doesn’t necessarily mean that every behavior
should have only one legal theory that applies. It’s a criticism of needless
duplication. But maybe sometimes there’s more than one troubling thing going
on. So kitchen sink complaints are bad
(fed infringement, state infringement, fed dilution, state dilution—though they
tend to stand or fall together)—but we need some ability to say “several bad
things happened.”

TM law is more than a time, place, or manner restriction, as
in ‘no performances on 5th Avenue.’
If a TM in Popeye effectively constrains me from making any use I can
share with other people, that’s a much bigger problem.

Dinwoodie: TM is affected by the intensity of the interest
on the other side of the wall. Lessons
for proposed short-term design laws: if the slightly watery conviction we have
that there’s limited TM harm here, is our analysis different if we have a
design law on the other side of TM instead of the free market?

Dogan: We don’t know!
This is an empirical question of whether there’s a market failure in
design/whether we’d incentivize more design, and whether the amount
incentivized is worth the competitive price.
European experiment strikes her as terrifying from a notice perspective—unregistered
design rights for any design; you don’t know which feature is protected. (But if you could actually trade product design trade dress as per
Litman’s suggestion for short-term design, incentives wouldn’t be the only
consideration.)

Goldman: at this point, his energies are going to safe
harbors and immunities cutting across doctrines that can protect against
cumulation of rights for activities that we want to have happen. §512 fixes
only one problem (maybe); §230’s brilliance is that it fixes all doctrines
except for those specifically enumerated, so it doesn’t matter if you plead
IIED, unjust enrichment, unfair competition, and tortious interference. That works really well.

Dogan: for the intermediary!

Goldman: fixing the transaction cost problem. We need a doctrine that cuts across all
advertising law claims, including TM.

Litman: aren’t there costs for the woman who wants Yahoo! to
take the bad information down? Many
people would like to get intermediaries to remove stuff and might have reasons
for that. Transaction costs of finding
and going after the original poster go up for her.

Goldman: consider the right to forget. Has received threats based on reporting on
the fact that a case was filed. The immunities/safe harbors cut through all
this. The problem is not that the
threatener is irrational, the problem is that there are so many claims he could
at least theoretically allege (e.g., interference with employment
opportunities).

McKenna: back to Heymann’s 5th Avenue example:
one difference is the meaningfulness with which you’re able to use a work. Vornado
says ‘you can use the design however you like, just not to cause confusion,’
but in that case the only reasonable use was as part of a fan. The promise was empty unless you can use it
in a meaningful way. Dastar: there’s
no meaningful right to use the work if you can’t use the work without
attribution, because you’ll be sued if you do use it with attribution.

Grynberg: would we be willing to trade design protection in
TM for a short term design right? If
that bargain could be struck, we’d have a negative space issue—not knowing what
the boundary between patent/copyright and TM is, we’d have the same questions
about a design right. So you’d need a very explicit
definition/negotiation/preemption provision (Dogan suggests election).

Friday, April 20, 2012

Devices: Sears/Compco/Bonito
Boats/Traffix/Dastar: patent/copyright trump TM at least some of the
time. SCt keeps coming back to the same
thing: TM shouldn’t be expanded in a way that interferes with the line Congress
drew for the public domain. Dastar has had a broader effect than
most foresaw; the courts have really taken Dastar
as a serious limitation on uses of §43(a).
Functionality more specifically addresses boundaries with patent. Traffix
rejects de facto functionality—but how effective has it been in clarifying
boundaries? Not in the Federal Circuit,
not much in the 9th, but in the other circuits the focus has largely
shifted from whether there are alternatives to the feature.

Moving in the right direction for defining boundaries, so
post-sale and initial interest confusion pose the biggest threat of unwarranted
expansion of TM into other fields. At
least in the case of product design, US courts have hesitated on the brink when
asked to combine product design and post-sale confusion.

Subject matter restrictions as boundaries: courts aren’t
very interested in that, as per Qualitex. Doctrines of election: would like to know
more about how that might work. Her initial response is that it’s formalism and
we’ve been there and rejected it already.
(Misuse as a modern version of election?) Tailored remedies? Disclaimers over
injunctions.

Mark McKenna

External concerns—interference with other IP regimes—or internal
concerns that identify firm boundaries for TM itself, determined by TM’s own
policies. Worth distinguishing though we
need no hard commitment to one. If you
look historically, there are many examples of the latter and very few of the former—courts
talking about the nature of the right, e.g., Prestonettes v. Coty—the word is not taboo: that’s about TM as a
limited right. Overwhelmingly true of
the things we think of as exceptions or channeling devices. We have to bounce back and forth between
external and internal.

More than just growing rights; coherence of the TM right
itself has broken down because there’s no consensus about what TM is supposed
to do. Puts more pressure on creating
doctrines that come in externally.

Qualitex: Aesthetic
functionality is conceived of purely as a matter of competitive need, not as
channeling. Lost/absent is the idea that
aesthetic functionality might police the boundary with design patent. This puts
a lot of pressure on the idea of a significant non-reputation related disadvantage.
Courts struggle hugely figuring out what is “non-reputation related,” since
features tend to offer a source signal and
a product feature that’s desirable. In Aut-omotiveGold, the source significance may be inescapable. Also, defendants’ needs may vary—easy to tell
a story where the need for an all-red shoe is greater than the need for a red
sole on a black shoe. But the consequence of functionality is usually no
protection at all. But there’s no reason why functionality has to be applied
that way—could be based on the defendant’s use.
Elements unprotectable in a product like color that indicates taste may
be protectable in a logo.

Aesthetic functionality is a very nice example of the
problems attending rules that require case by case decisions. If you follow the Teller debate among IP
profs, everyone agreed on the result but substantial disagreement on the right
doctrinal route, and that’s not surprising because the defenses boil down to “defendant
needs this for some non-source-related reason,” but in different ways; this
requires difficult case by case analysis of whether confusion overrides need.

Dastar: A
chameleon case. Could well be a
significant boundary policing case, but there are things that make its
application unclear. What about cases
where the content at issue has secondary meaning, so P asserts ordinary forward
confusion case? Dastar could be read to have nothing to say, in which case it’s
extraordinarily narrow. What if there is
an explicit misrepresentation? Court
seems to want to leave false advertising open, but lower courts haven’t taken
up that invitation.

Primary Discussants: Graeme Austin

The old Trademark
Cases were about saying what the Commerce Clause means; Bonito Boats is about federalism,
federal/state boundaries. Traffix had a statutory basis for the
concern over functionality, but Court specifically held back from internal
constitutional preemption points. In Dastar, the Court took upon itself a
determination to reconcile a body of different congressional statutes against background
principles that Congress is sensible and that IP reflects a carefully crafted
balance. Where did they get those ideas? Congressional lawmaking in IP is siloed with nary
a concern for fit. Do we want the
judicial branch to be purifying the law or living with the messiness? Dastar
had a way out: could’ve interrogated much more carefully the bizarre doctrine
of “bodily appropriation,” a very unstable doctrine that was just about
copying. For the lower court to say that
subsumed likely confusion analysis was already very problematic. These strong statements in Dastar can’t be meant to be legislative
in approach.

There is strong language in other cases, like Coty, about what TM is and isn’t
supposed to do w/r/t mere reproduction.
But reproduction of the mark itself is a key factor. Dilution is also a body of cases nudged by
the Supreme Court; copying of mark nudges towards finding; secondary meaning
also takes deliberate copying into account; merchandising rights are a place
where copying leads to a P win.
Loosening of licensing/assignment rules also means the goodwill doesn’t
have to go w/the TM, what people are buying/selling are the marks themselves.
If we’re going to engage with boundaries, we should also engage with the
instincts courts have about copying.

TRIPS/double identity: same goods/same mark is getting close
to an anti-copying rule; counterfeiting as another anxiety running through
international agreements. Should think
of counterfeiting/what’s called counterfeiting, too.

Can channeling theories be reconciled with international
treaties? Are they legitimate exceptions
as provided for in TRIPS?

Annette Kur: European version—functionality for shapes necessary
to obtain certain technical results; shapes that give substantial value to the
goods. The latter is troubling and doesn’t
work very well in practice. What is the
objective? If we’re talking in the end
about competition, and you can’t ever protect something no matter how much
secondary meaning it acquires, that’s troublesome. We have mandatory protection
for 3D shapes (that otherwise qualify) and design protection as well. So it doesn’t work. You could say that particular shapes should
be excluded if they can get design protection, but the threshold for design
protection is extremely low. The judge
would then have to make a protectability determination, and most 3D shapes
would pass, preventing them from getting TM protection in the first place
unless they were very commonplace or plain (which raises problems of its own).
What would make sense, if you want to exclude overlap between TM and design,
then prohibit TM protection for 3D shapes.
But then you have to change the law.

Doesn’t want to make the judge into a design jury looking
for some outstanding quality. Whether a
shape has secondary meaning/quality of indicating origin—should make the
requirement for showing that very strong.
Uniqueness could help measure that.
But high degree of market recognition could work. Even if there is a high degree, she would
still require a balancing as to whether in spite of the secondary meaning there
is still an overriding need for competitors to use.

Dogan: Kur highlights the difficulty of aesthetic
functionality. She thinks a.f. is an
intrinsic boundary within TM law, and that may be a different view of the
normative function of TM in the US compared to Europe. We think of TM as promoting competition—idea
of protecting a design that gives independent aesthetic value to the object, in
perpetuity, is problematic from a competition oriented tradition—consider the
Barcelona chair or other modern furniture design. Maybe there is a secondary meaning argument,
but it’s troubling to think that this aesthetically interesting object can
never be copied by anyone else. Maybe
this intractability ultimately leads us to the idea of abandoning this kind of
protection entirely. Force people to use
other methods of branding! But there’s not a lot of appeal to an intermediate
protection that only kicks in with really
really strong secondary meaning, or limits for really really strong competitive needs, which is just too hard.

Kur: but note international obligations.

Lemley: A.f. as a doctrinal/channeling device that maps to
regular functionality: design patent and utility patent. Coming around to the view, though, that it’s
not exactly channeling but internal boundary: things that are purchased because
they are aesthetically desirable are not the proper subject of TM, and that’s
true whether design patent or copyright would be available to them or not (as
they would not for a sole of a single color).
Hard part is disentanglement.
Things are often both desirable because aesthetically pleasing and
desirable because they have brand significance.
What we do in similar circumstances, like genericide: we ask people why
they’re buying the product and go with the majority. We do it all the time on the infringement
side, but could do it on the defense side as well. Some people will say “both,” and that will
require you to make hard calls in genericide.

McKenna: what’s the survey question?

Lemley: why did you buy?
Do you care who made it? What if
I told you it was made by X, would you still buy it/pay less? Yes, surveys are awful, but what are the
alternatives? The TM bar wants to say
aesthetic functionality doesn’t exist.

Janis: maybe a.f. shouldn’t be called functionality at all.

McKenna: McCarthy likes the results, but hates the label—he
says something that’s functional for market purposes = not protectable (e.g., a
heart-shaped box for Valentine’s Day chocolates), but he won’t call it aesthetic
functionality.

RT: Lemley’s comments show that a.f. is connected not just
to genericity but to materiality—look at the Qs he suggests asking. Possible counterfactual analysis: would the
feature still be desirable in a world without secondary meaning? Courts can do that without surveys and though
it’s not without flaws we do use counterfactual analysis in other tort cases on
a regular basis.

Burrell: Australia uses various policing devices—sometimes refuses
protection; sometimes apply doctrine of election; sometimes infringement;
sometimes defenses; sometimes TM protection that ends when the other IP right
ends: 2 years after a patent ends. Say you’re the sole producer, which
therefore is identified with you, during the patent period.

McKenna: what’s the point of the TM then?

Burrell: well, the D might not be infringing the patent; or
maybe the designer who individually owns the design right isn’t interested in
enforcing that.

TMEP writes aesthetic functionality out of US law; it’s not
just McCarthy.

Sheff: let’s say an ugly design becomes beautiful because
the right kinds of people are consuming it.
We may still want to bound TM rights so as not to protect that
particular kind of consumer motivation, notwithstanding the source
identification aspects.

Mark Lemley: Functionalicide? (Of course the green farm equipment case
already did this.) Most people are
buying it now because they’ve learned the new language in which the designer
spoke, so to speak, and not because of its brand features.

Sheff: they could do both: know it’s a brand and consider it
attractive and desirable. We still might
not want to protect that.

Leaffer: ordinarily Xerox tries to avoid genericide by
trying to convince people it’s a brand.
How would a TM owner protect itself against losing a mark in this way?

Sheff: if the argument is that abandonment is a series of
actions of omission or commission that causes loss of source significance, one
meaning might be that it’s acquired some significance that trumps source
significance, and one significance might be social.

We read Dastar for
more than it gives us—it’s just the Bonito
Boats of horizontal rather than vertical IP law. Scalia sees the claim as mini-copyright.

He doesn’t see Traffix
as a channeling case but as a continuation of Wal-Mart. Courts see
competitive necessity as important still; they haven’t read Traffix as channeling to patent. Just as in Wal-Mart, we made something suitable for summary judgment. By making Inwood
Labs into something that involves issues that can be decided by judges, we
can get rid of potentially harmful strike suits.

It is harder to monitor boundaries in a common law field
because courts feel free to borrow. This
is both a cause and a symptom; legislative intervention may not be the
desirable outcome either.

McKenna: It’s really the Fed. Cir. that isn’t willing to go
along with Traffix; the rest of them
are falling in line. Easterbrook in Jay Franco moves away from Morton Norwich, which is now in the
minority. Lemley tried to distinguish
mechanical and aesthetic functionality as external and internal limits, but
McKenna doesn’t think that works. Mech. functionality
too involves people buying because the product works and not because of source
significance; a.f. also has a channeling function.

Lemley: imagine a Vornado-like case in which it turns out
that there’s absolutely no benefit to the fan shape but it’s the subject of an
expired utility patent—do we care just because of the expired patent?

RT: but the standard argument is that even if so, assuming
there are 15 equivalent designs, we don’t want 14 of them to be appropriable by
competitors so that the remaining competitors all have only one choice.

Lemley: that’s merger, really. Patent is not really the issue here.

McKenna: would be more robust if courts thought of
functionality both as competition and as channeling. Though he’d vote for Bone’s position that
design protection isn’t worth it.

Beebe: one origin of the problem with a.f. is the bar on
making aesthetic judgments in copyright and design patent. Copyright and design patent we won’t make
aesthetic calls; ornamentality standard is really only distinctiveness, so low
it’s borderline Feist. So there’s
nothing over there claiming that space for aesthetic values. Comes back to
haunt other areas of IP when it has to confront the nature of aesthetic
judgment because patent and copyright refuse to do so. Inwood:
judge can avoid a trial by looking at a product in a vacuum: if I break off
this piece, will the product continue to work? If no, it’s functional and we’re
done. If the issue is a.f., though, you
can’t do that; you need to know that ugliness can become beautiful if it walks
down the runway. We have no standards
for progress in a.f.

Litman: most helpful formulation is Posner’s: both kinds of
functionality look at utility in the economists’ sense. TM law shouldn’t
protect any feature that is useful in that sense. We need to try and distinguish between the
product, whatever it is, that people want to buy, and anything that tells you
where the product comes from/who makes it.
A.f. is a bad label because it encourages us to construe it too
narrowly. Not about aesthetics nor about
functionality.

Bone: example: goats on a roof—TTAB dealt with it as
aesthetic/utilitarian functionality and allowed the registration of goats on a
roof as a design element.

Mid-point summary: Laura Heymann

How does change happen?
Statutes or case law? Need to ask
how judges see their role: not just resolving particular disputes but also
trying to make sense of the law more generally.
Descriptive fair use in the Lanham Act—even after KP Permanent, hasn’t had the effect one might have thought it
would.

Functionality from the defendant’s side: could be analogous
to descriptive fair use, where TM owner doesn’t lose all rights but simply can’t
stop a particular kind of use. (This is
what the amicus brief I worked on in Louboutin
argued for.) Def’t is not using a mark
as a mark but for other purposes. Defendant’s
use may appear the same as a visual
matter but should be conceptually distinct.

Procedural v. substantive.
Why is it that we might look for boundaries? An intrinsic sense that we
prefer limits to the law? Concerned
about overlap with particular doctrines?
Or is it procedural, wanting bright-line rules with the risk of rigidity
but the benefit of predictability and resolution at earlier stages of
litigation?

Ability to extricate what the appeal of a feature is:
interesting that we talk about Louboutin
as an a.f. case. Is it aesthetic because
it’s source-identifying? (This is why I find the counterfactual approach
appealing.) Louboutin is overclaiming
the scope of the mark, which really should be the red sole in contrast to the
black pump. No one is looking to match
that configuration to their outfits, but becomes socially appealing as part of
display to other people, but that’s also because of source-identifying function
in that people want others to know that they have the money to buy these kinds
of shoes. The all-red shoe doesn’t
involve any of this—red sole isn’t contrasting; doesn’t serve as display of
wealth because the whole shoe is red.

Stacey Dogan: Different kinds of boundaries that have come
up, most obviously boundaries between different forms of IP. TM law deferring to its own pro-competition
objectives—a.f. may be like that in part.
Conceive of functionality through the lens of economics, as Litman
suggests? Maybe the term should be
aesthetic utility v. Traffix
utility.

What is pragmatically achievable? In an ideal world we might do X, in this
world we need to think of ways at coming at these questions that will influence
the development of the law.

Kur: could it be that utility is the same as competitive
essentiality?

Litman: a difference is if you talk about competitive
necessity narrowly, courts will ID other alternatives and say it’s not “necessary.” Utility = competitively desirable is enough.

Goldman: question of mislabeling of a.f. got him thinking
about Rosetta Stone and keyword as
functional. Makes him question all the
semantics. In any lay sense, using a keyword to trigger ads is functional—in
the reporting on the case, the pundits from the practicing bar were all focused
on the court’s reversal on that point. Should
TM law treat keyword trigger use as functional?
Could we create a bunch of kinds of functionality?

Lemley: it’s not about the mark, it’s about D’s use of the
mark.

Litman: it’s a nominative use.

Goldman: he thinks nominative use is a fine place to house
it, but the factors we have now aren’t the right place to house it—I may not be
referring to the P in my ad at all, but just trying to attract P’s customers. (Much cross talk about whether this would
count as nominative fair use because of the implicit reference to P or reliance
on P to target.)

Austin: TRIPS says registrability can depend on acquired
distinctiveness, and a.f. offers opportunity to push on that point, and require
a factual record that there is such beyond the aesthetic nature of the product
or design. Rights standard talking about
confusion also invites such analysis because of the question of whether
something has source designating significance—these are internal mechanisms for
policing these concerns. Show us that there’s a TM rather than
accepting a doctrinal shorthand, as the lower courts did in Dastar.

He worries that saying that US doctrine manifests concern
for the public domain is overly hopeful.
Golan, Kewanee, Park-n-Fly are
not cases that wave the pennant for the public domain at all. We should look coldly at the full body of
cases, including solicitude under state law for post-Dastar claims. Maybe we need
to push harder on remedies, survey evidence requirements, etc. if the grand
principles aren’t there.

Bently: As Kur said, EU deals with boundary problems through
subject matter exclusions, very different from US; reflects our focus on
registration. But Kur’s response to
problems of a.f.—to get rid of the exclusion—isn’t a great answer. We all agree
there’s some public interest served by the a.f. exclusion, but it’s a problem
having it in the subject matter. Could it be better placed? Bone’s hope to get
rid of 3D marks is unlikely and under TRIPS couldn’t be gotten rid of for
foreign marks; note that the USTR goes around forcing countries to protect
marks like the lion’s roar. Could we
exclude the aesthetic component from the likely confusion analysis? That’s probably ok under TRIPS. Kur says she wants to do that as a matter of
EU law.

Might also be there already; one case said competitive need
is irrelevant, but another said that progress to genericity is relevant in a
likely confusion analysis, leaving a.f. somewhere in the middle. If one problem with a.f. is timing (beautiful
things can be beautiful because of fashion created by P), then maybe timing can
be taken into account in the analysis.

Kur: wants a new limitation on descriptive uses to include
also use of signs that are not distinctive—a limitation that can be used to
make clear that someone is not using a feature to indicate commercial origin
but rather for its aesthetic function.

Bently: but is having it as an exclusion problematic under
TRIPS?

Dinwoodie: Kur also proposed expanding functionality in
other ways, including colors.

McGeveran: In the past I didn’t think we properly defined “internal”
and “external” and we’re still doing it. Some of the values driving TM doctrine
of course also drive the construction of these other doctrines the values of
which we are policing. Both copyright and TM care about expression and leaving
language open to competitors/authors.
What is presented in case law as channeling—utilitarian functionality
excluded from TM on patent’s behalf—also
serves to further TM’s competition values.
Boundaries however still make rhetorical sense, because courts do pay
attention to the idea of a wall that prevents TM expansion: utilitarian
functionality again—there’s a complex and intricate patent machine that shouldn’t
be disturbed; that may be more forceful/persuasive way of upholding competition
values that could also be described as internal to TM. He sees the same thing happening with the “First
Amendment,” even though the doctrine that then gets applied has scant
resemblance to First Amendment doctrine in other areas. Can be successful and can also impoverish our
sense of what TM law is up to on its own theories & terms.

RT: Left over from the prior session: I worry that we are
reifying utilitarian functionality, or Traffix
utility if you like, in our discussion of aesthetics. What it means to “work”
is socially dependent in many cases just as beauty is, e.g. does the Segway “function”? Does a skateboard? What about a scooter? What about high heels--if you break them off
they can be easier to walk in! Ken Alder’s
Engineering the Revolution about the
meaning of interchangeable parts for guns in the period surrounding the French
Revolution is a good book on this point.
But I only have to look at the shattered glass back of my iPhone to know
that it’s still true.

McKenna: courts frequently say that aesthetic features aren’t
competitively necessary—they have this sense that utilitarian competition is
normal, but you should create your own design; it’s normative all the way down
despite the empirical reality that aesthetic features matter to consumers. They
feel there’s more there there with mechanical features.

Leaffer: but you do frequently have more satisfactory
alternatives with aesthetics?

McKenna: no, that’s not true! (I’d add: look at the various wheeled ways to
get around—lots of alternatives there!
More than with many “aesthetic” choices.) If you’ve already
predetermined that you don’t need to compete in the aesthetic market, then of
course it won’t be competitively necessary—you need a definition of the market
first!

Lemley: why do we need two functionality doctrines? What we really care about is intrinsic value,
which is pretty much expressed in cases like Traffix: does it affect cost/quality of the article. Quality: we
have to take to mean appeal of the article. But if it affects appeal for
reasons unrelated to source identification/brand (Sheff interjects that those
could be 2 different things), why not just stop talking about a.f. and start
talking about a color that gets more people to buy it as affecting the quality
of the product.

Grynberg: doctrine has become very cloudy, and when courts
try to clear things up they often cut away things some of us like: Dastar is a prime example where some in
the room think the Court went too far on attribution.

McKenna: quest to create TM rules that allowed owners to
capture every little bit of TM value is what led courts to go way overboard, so
he’s ok with some roughness. Teller: all
these doctrines speak to a defendant who wants to use something not as a mark,
but we have bunches of names for the doctrines that allow this. The boxes exist
because courts keep finding new manifestations of the problem—so we’ll create a
new one if we can’t fit it in. Or we could have a broad doctrine (not TM use!)
about access to the thing for a particular type of defendant.

Litman: another border worth thinking about—the border
between registered and unregistered. TRIPS would allow us to eliminate
protection for unregistered marks/at least product design marks. PTO is not
terrible at making these distinctions. Not
even politically impossible. INTA has an
interest in “everyone should register their TMs.” A lot of trouble comes from claiming TM
without ever having to go through a registration gatekeeper, at which point a
court says “this is free riding and defendant loses.” If you had to persuade the PTO that secondary
meaning existed, that would be a big help.

Dinwoodie: same thing with unregistered design right in EU,
where you can define the right in litigation, and the abuses that creates are
substantial.

Bone: Likes that idea!
Not just for gatekeeping aspect, but also as a proxy for whether the
firm really is thinking of the “mark” as a source identifier or is just
objecting to copying.

External/internal: one could pull the idea of facilitating
downstream innovation into TM law, but be careful: that would mean that
incentivizing the adoption of creative & interesting marks would seem to
become a relevant policy consideration.
(McKenna points out that Two Pesos
is replete with this language, but Bone says that’s always been unstable and he
wants to keep it that way.) Internal coherence of TM policy justifies keeping
incentives outside.

Dinwoodie: Litman’s idea makes a doctrine of election much
more workable.

McGeveran: Doesn’t consider rhetoric to be a bad word. Just be clear that internal/external rhetoric
is not as clear as it might seem.
Functionality can’t be explained only as respect for patent/TM boundary,
because there’s plenty of nonpatentable functional stuff. (My reaction: But the theory is that patent
law wants those, largely, to be
freely copied, so the patent boundary exists in its negative space as well.)

Dogan: but it can lead to very different outcomes if
considered internal v. pushing back against something.

McGeveran: there’s stuff that’s patentable, there’s stuff
that’s excluded by patent, and a third category that while not covered by
patent might be covered by TM. How will
we figure out when patent’s “no” is TM’s “yes, you can get rights in this”?

Lemley: “no, you can’t get a patent” v. “no, this is the
kind of thing we want to be freely copied.”

McGeveran: but that requires you to know something about TM
and what TM wants to be controlled.

McKenna: it’s not enough to say that patent law has already
made a specific call about a feature.
Instead if it’s the kind of thing patent law speaks to, TM should stay
out.

Litman: so any arguably patentable design.

McKenna: yes. No
trade dress protection!

Austin: what about Kellogg:
you can use it, but you have to use it fairly (labeling etc.).

McKenna: he’s fine with that as long as there are no rights
to the design.

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